intu metrocentre finance plc presentation to fixed income ...€¦ · intu metrocentre finance plc...

intu Metrocentre Finance plc Presentation to Fixed Income investors

22 May 2014

Presentation to Fixed Income Investors

• Corporate overview – Matthew Roberts

• Financial details – Group

– Matthew Roberts

• Financial details – intu Metrocentre – Matthew Roberts

• Asset management overview

– Mike Butterworth • Questions

• Appendices

intu Metrocentre Finance plc

This presentation includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Intu Properties plc to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this presentation on the price at which shares or other securities in Intu Properties plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance

Corporate overview Matthew Roberts, Finance Director

Scale, focus and quality set Intu apart

2 Assets of which Intu’s share is >£100m

• Brand launch and culture change

• Major refinancings

• Asset management

– moving on from lease expiry concentrations and tenant failures

• Development pipeline

– planning approvals

• Acquisitions

– UK and Spain

• Financial results

– focus on total property return

Overview of 2013

Created nationwide consumer-facing brand, intu Significant benefits

• Reinforcing scale of intu and importance of intu centres with retailers

• Extending dwell time and spend

• Engagement with consumers – ancillary income from new services

• Operational efficiencies

• Nationwide marketing partnerships

• Media benefits of same company and centre name

• Data collection and analysis

• Driving footfall between online and physical

Digitally connected

• 11 centres free Wi-Fi - approaching 3m registrations

• Ownership model – infrastructure and data

• 60% of Wi-Fi registrants “opted in” to marketing

• 9 million unique visitors to our websites

• intu.co.uk up and running

• Optimise performance of existing assets through active asset management

– focusing on customer experience, combining retail, catering and leisure

• Continue to improve financial flexibility

– including capital recycling and introducing partners

• Obtaining competitive advantage from intu brand and digital presence

– demonstrating the benefits of scale and national coverage

• Seizing opportunities for profitable expansion

– drive forward £1.2 billion development pipeline

– acquisition opportunities

Intu’s priorities – leading change

Financial details - Group Matthew Roberts, Finance Director

Key highlights – year ended 31 December 2013

• Underlying earnings per share 15.0p (2012 16.1p) - impact of tenant failures and lease expiries

• Final dividend 10p; full year dividend 15p

• NAV per share 380p

• £1.8bn refinanced in 2013 via bond issuance and bank debt

• Robust financial position: debt to assets ratio 48.5 per cent, 8.0 years average debt maturity and £325m* of cash and committed facilities at year end

• £110m tap of intu Trafford Centre; targeting c 50% leverage on Parque Principado

* Includes intu Metrocentre CMBS (£69m)

2013 valuation surplus + £126 million, +1.8%

Market value

Like-for-like surplus (deficit)

£m £m % intu Trafford Centre 1,900 94 5.3

intu Lakeside 1,125 26 2.4

Manchester Arndale 399 15 3.7

St David’s, Cardiff 272 16 6.4

Cribbs Causeway 242 7 2.8

intu Eldon Square 250 -7 -2.9

intu Potteries 163 -6 -3.6

intu Bromley 159 -7 -4.1

Significant valuation movements:

2013 underlying earnings (£m)

2013

£m

2012

£m Net rental income 369.5 362.6 Administration expenses (27.7) (26.7) Net finance cost (underlying) (203.1) (204.0) Dividend from US investment 6.3 6.3 Other (4.8) (0.5) Underlying earnings 140.2 137.7 Interest cover 1.71x 1.69x EPRA cost ratio (1) 15.7% 16.4% Earnings per share (pence) 15.0 16.1 Average shares in issue (million) 935.3 853.8 Dividend per share (pence) 15.0 15.0

(1) The EPRA cost ratio presented excludes direct vacancy costs and is calculated in accordance with EPRA guidelines

Change in like-for-like net rental income (%)

Net debt to assets 48.5%

Robust financial position

31 December

2013

31 December

2012 Total properties at market value £7,624m £7,073m Net external debt £(3,698)m £(3,504)m Net debt to assets 48.5% 49.5% Cash and short term investments £235m £188m Undrawn committed corporate facilities £90m £375m Net assets attributable to shareholders £3,519m £2,977m Adjusted net assets per share 380p 392p Weighted average cost of gross debt 4.8% 5.2% Weighted average maturity of gross debt 8.0 years 6.1 years Illustrative enlarged group

Adding newly acquired assets at valuation and debt secured thereon:

Total properties at market value £8,490m Net external debt £(4,096)m Net debt to assets 48.2%

Debt maturity as at 31 December 2013

• Weighted average debt maturity of 8.0 years

• Largely fixed, weighted average cost 4.8 per cent • £325m of cash and committed facilities

• £110m tap of intu Trafford Centre; targeting c 50%

leverage on Parque Principado

• 2014-2018 Capex: £86m committed; £215m uncommitted (excludes major extensions)

Financial details – intu Metrocentre Matthew Roberts, Finance Director

Key metrics 31 December 2013 (1)

(1) Source: 2013 Annual Report (2) The market value of £885m includes ancillary properties and land valued at £3m that are not part of the security for the Intu Metrocentre Finance plc bond issuance

(2)

Summary Financials Overview of Historical Performance

FY 2011 (£’m)

FY 2012 (£’m)

FY 2013 (£’m)

Rental receivable 58.3 55.2 53.4 Service charge income 11.2 11.1 11.5 Turnover 69.5 66.3 64.9 Service charge costs (11.5) (12.8) (12.9) Other non-recoverable costs1 (6.5) (7.9) (7.5) Net rental income 51.5 45.6 44.5

Administrative expenses (2.0) (1.8) (1.8) Operating profit 49.5 43.8 42.7

Source: The Metrocentre Partnership report and accounts for the year ended 31 December 2012: Management accounts for the year ended 31 December 2013

Metrocentre Operating Profit Occupancy Rates

Historic Yield

____________________ 1) Includes ground rent, void rates, professional fees, centre management non-recoverables

Oct-13

93% 98% 98% 96% 96% 94%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013

5.78%

3.02%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13

Nominal Equivalent Yield 10- year Gilt

Dec-13

• 94% occupancy rate

• 20 significant long term1 lettings exchanged in 2013, representing £2.9m of new annual rent

• Significant lettings in 2013 include Superdry, Size?, Lego, Phase Eight, Footlocker and Ed’s Diner

• 9 tenant unit administrations in 2013, 4 have been re-let, 1 still trading, 3 under offer and 1 closed

Key Statistics Tenancy Overview

Recent Letting Activity and Occupancy Rent Review Cycle

____________________ 1) Leases longer than 5 years

Source: Intu Properties plc

3%

20%

10%

24%

13%

2014 2015 2016 2017 2018 0%

5%

10%

15%

20%

25%

Asset management overview Mike Butterworth, Chief Operating Officer

Delivering change, delivering great experiences

Development pipeline

2.6 million sq ft, 1.8 million sq ft consented, with 30 planning approvals

* Indicative timings – actual timing of expenditure will be dependent on a number of factors including timing of planning permission and tenant demand.

2013 million sq. ft.

2018* million sq. ft.

2023* million sq. ft.

Total size 18.2 19.3 20.8

Catering and leisure 1.9 2.8 3.4

Driving growth through active asset management

Letting strategy Improving tenant mix Sustainability with

key retailers Achieving ERV on review / renewal

+ + 1 2 3

The right space at the right rent Goal

Outcome Tenant re-investment and commitment to the Centre

Consistent growth in rental income

Intu’s Asset Management of Metrocentre

Asset Management Strategy

Recent Asset Management Initiatives

Asset Management Team

• To reconfigure existing units and reduce the overall number (where possible) aimed to meet the requirements of modern retailers, ‘right sizing’ stores and creating flagship units

• Build on the success of existing catering and leisure with Qube 2 restaurant development

• To complete a comprehensive mall refreshment, commencing with Platinum Mall

• Continue to invest in the centre to improve its aesthetic qualities with works to the other malls following the Platinum Mall refreshment

• Intu brand rollout, including installation of free Wi-Fi, lively new signage and a fresh customer service approach

• Launch of MetrOasis and introduction of a champagne bar to expand catering offer

• New lettings to Tessuti, Lego, Size? (first shopping centre store) and Ed’s Diner have been exchanged in the last 12 months

• Former Primark unit (Unit 9) has recently been split to create a 12,500 sq ft unit for Superdry with the remainder being marketed as a flagship opportunity

Mike Butterworth Chief Operating Officer

• The Asset Management Team for Metrocentre has a combined experience of over 60 years

Kate Grant Asset Management Director (based at Metrocentre)

Bernice Nesham Senior Asset Manager

Jill Heywood Asset Manager

Intu – Asset Manager

Current Projects

Platinum Mall Refurbishment

• Works comprise the re-branding and mall makeover of Central Mall to create a new ‘Platinum Mall’ offer

• Aimed to re-position tenant mix with more aspirational lifestyle brands – lettings currently exchanged with Phase Eight, Tessutti, Daniel Footwear, Mamas & Papas and Circle 360 Champagne Bar

• Works will complete in June 2014 and include new ceiling, lighting, balustrades, column treatments and the installation of several new bespoke chandeliers

• Construction costs of c. £5m


Current Projects

Development of Qube 2

• To comprehensively re-develop the Mediterranean Village and create new catering units in an area to be known as Qube 2

• Former Mediterranean Village is located next to the Qube leisure quarter and comprises a number of existing restaurants and small retail units

• Planning consent has been granted to remodel and refurbish this area creating 11 catering units to complement the existing Qube catering offering

• The new catering units, some of which could have mezzanine areas, are currently being marketed

• The programme currently shows a start on site in Summer 2014 and opening in 2015

• Construction costs of c. £17m


400 million customer visits a year

£1.2 billion development pipeline over next ten years – that’s over 2.5 million sq ft of new retail, restaurants and leisure of which 1.8 million sq ft has planning approval

£70 million Investment by retailers in our centres during 2013

Average dwell time

100 minutes

Q&A 12/25 12 of the UK’s top 25 shopping centres

Appendices

Fashion (41%)

Food & Drink (11%)

Department (7%)

Electronics & Mobile (7%)

Health & Beauty (7%)

Jew ellery (6%)

Household goods (5%)

Entertainment (4%)

Variety (3%)

Toys & games (3%)

Other retail (6%)

Tenant & Lease Summary

• Metrocentre is let to a diverse mix of retail, catering and leisure

• Main tenants are key UK flagship anchors: House of Fraser,

Debenhams, Primark and Marks & Spencer

• Other major space users include TK Maxx, Odeon, BHS, Next, Boots, WH Smith and Argos

• A number of the tenants have their best performing stores in

the centre, e.g. Odeon (best performing site outside of London), Nando’s (Top 5 store in the UK) and Sports Direct (Top 10 store in the UK)

• Weighted average lease length is 14.3 years until expiry and

8.7 years until first break • The top 10 tenant groups represent 32% of passing rent and

have a WAULT until expiry of c. 31 years and first break of 16 years

• Typical lease terms include 10 years at a fixed rental level

with an upward-only rent review at the end of year 5

Tenant Mix by Income

Rental Value by Unexpired Lease Length to First Break (£m)

Source: Intu Properties plc

Key Statistics

18.2 18.6

3.8

8.3

1.8

0

2

4

6

8

10

12

14

16

18

20

2014-2018 2019-2023 2024-2028 2029-2038 2039+

Centre Location Centre Location 1 Westfield London London - Shepherds Bush 23 intu Bromley Bromley 2 Bluewater Greenhithe 24 intu Eldon Square Newcastle 3 Westfield Stratford City London - Stratford 25= intu Braehead Glasgow 4 Meadowhall Sheffield 25= Victoria Square Belfast 5 intu Trafford Centre Manchester 27 East Kilbride Shopping Centre Glasgow 6 St David's Cardiff 28 Victoria Quarter Leeds 7 intu Lakeside Thurrock 29 Silverburn Glasgow 8 intu Metrocentre Gateshead 30 White Rose Shopping Centre Leeds 9 Liverpool One Liverpool 31 The Oracle Reading 10 Bullring Birmingham 32 Buchanan Galleries Glasgow 11 Arndale Centre Manchester 33 Churchill Square Brighton 12 Brent Cross London 34 Golden Square Warrington 13 intu Merry Hill (2) Brierley Hill 35 Trinity Leeds Leeds 14 The Mall at Cribbs Causeway Bristol 15 Cabot Circus Bristol 16 Cabot Place, One Canada Square London 17 Highcross Leicester Leicester 45 intu Victoria Centre Nottingham 18 intu Derby (2) Derby 50 intu Potteries Stoke-on-Trent 19 thecentre: mk(3) Milton Keynes 52 intu Chapelfield Norwich 20 intu Watford Watford 60 intu Milton Keynes Milton Keynes 21 Festival Place Basingstoke 71 intu Uxbridge Uxbridge 22 West Quay Southampton 187 intu Broadmarsh Nottingham

Intu - leading owner, developer and manager of prime UK shopping centres

Source: PMA (1) Top shopping centres on basis of PMA Retail Score (December 2013). Intu shopping centres highlighted orange (2) Acquired 1 May 2014 (3) Adjoined by intu Milton Keynes, which was acquired by Intu in March 2013

Yield comparisons

• Prime UK shopping centres - attractive asset class for major international investors

• Wide spread relative to corporate bonds

28 March 2014

Intu Metrocentre Finance plc Investor Report year ended 31 December 2013

Key Data – 31 December 2013

Loan to Value 55% Historical EBITDA £m 44.8 Historical Interest Charges £m 20.2 Historical ICR 222% Gross leverage 55% Trigger Event outstanding No Event of Default outstanding No Any covenant breach outstanding No NB - the calculation is based on a full year's EBITDA and finance costs. Historical ICR based on the methodology set out in the Intercompany loan agreements

Historical EBITDA (Full Year) £m 44.8

Historical Interest Charges (Accrued from issue date - 20 November 2013) £m 2.3 Historical ICR 1927%

Debt Information - General

Class A ISIN XS0994934965 Issuance Date 20/11/2013 Expected Maturity Date 06/12/2023 Legal Final Maturity Date 06/12/2028 Interest basis Fixed Interest periods Semi Annual Amortisation Type Bullet Accrual Method Act/Act

Ratings (S&P / Fitch) Class A Original BBB+ (sf) / A sf Previous BBB+ (sf) / A sf Current BBB+ (sf) / A sf Ratings watch N

Debt Information - Other

Principal Class A Outstanding Principal Amount - Initial £m 485.0 Outstanding Principal Amount - Opening £m 485.0 Principal repayment / prepayment £m 0.0 Outstanding Principal Amount - Closing £m 485.0 Interest Class A Coupon 4.125% Interest payment £m 0.0 NB - There was no Interest Payment Date during the period from issue to the 31st December 2013

Trigger Events / Defaults

Trigger Events

Status Notification of

OST

Commentary (including cause, consequence and cure rights as applicable)

Event (Y/N) N N n/a Trigger Event (Y/N) N N n/a Events of Default

Status Notification of

OST

Commentary (including cause, consequence and cure rights as applicable)

Potential Obligor Event of Default N N n/a Obligor Event of Default N N n/a

Portfolio Information – Composition

Asset Name Valuation Commentary Acquisitions 0 0 n/a Disposals 0 0 n/a Debt prepayment requirements following portfolio changes in £m 0 Amount reserved pending prepayment / reinvestment £m 0 Defeasance amounts utilised for acquisitions £m 0 Most recent valuations

Most recent

valuation Market

Value (£m)

% of total market value

Net initial yield

Nominal equivalent

yield Name of Valuer intu Metrocentre 31-Dec-13 826.0 94% 4.92% 5.75% CBRE Limited

Metro Retail Park 31-Dec-13 56.2 6% 5.36% 6.26% CBRE Limited Any additional properties Total 882.2 100% Total Collateral Value attributable to existing properties £m 882.2 Total Collateral Value Attributable to developments £m 0.0 Total Collateral Value £m 882.2

Developments

Total aggregate Contracted Development Costs as percentage of current 0.0% Total Collateral Value (<=10%)

Portfolio Information – Property Data

Tenure Leasehold Area (million sq ft) 2.0 Number of retail leases 351 Current Net Income £m 47.4 Current Passing Rent £m 50.8 Estimated Rental Value (gross) (“ERV”) £m 62.8 Market Value £m 882.2 Occupancy * 94% Annual footfall (million) 23 Average lease term unexpired years 14.3 Net Initial Yield 4.95% Nominal Equivalent Yield 5.78% *The passing rent of let and under offer units expressed as a percentage of the passing rent of let and under offer units plus ERV of of un-let units. Units let to tenants in administration and still trading are treated as let and those no longer trading are trading as

as un-let.

Tenancy Information – Portfolio Lease Expiry

Years Vacant 2014-2018¹ 2019-2023 2024-2028 2029-2038 2039+ Tenant break not exercised weighted by: Rent £m 0 14.5 22 3.6 4.4 6.3 % of total rent 0% 29% 43% 7% 9% 12% Space (ft²) 82 346 624 158 241 555 % of total space 4% 17% 31% 8% 12% 28% Tenant break exercised weighted by: Rent £m 0 18.2 18.6 3.8 8.3 1.8 % of total rent 0% 36% 37% 7% 16% 4% Space (ft²) 82 498 491 161 586 187 % of total space 4% 25% 24% 8% 29% 9% (1) 2014 includes any leases that have expired, but the Tenants are holding over under the Landlord and Tenant Act and any Tenants on a tenancy-at-will. In both

instances it assume these leases will expire in 2014.

Tenancy Information – Tenant Concentration

Tenant % of total passing

rent Cumulative % of total

passing rent Average lease expiry

(years) Arcadia 7% 7% 32 House of Fraser 4% 11% 72 Debenhams 4% 15% 25 Primark 3% 18% 18 Boots 3% 20% 8 Next 3% 23% 11 Marks & Spencer 2% 25% 95 Sportsdirect 2% 27% 3 Odeon 2% 30% 21 Goldsmiths 2% 32% 8

Tenancy Information - Other

Tenants in Administration Since the date of issue, one tenant has entered administration (representing 0.2% of passing rent). The tenant is still trading and discussion are ongoing with the new owners. Rent Review outstanding As at 31 December 2013 there were forty two rent reviews outstanding.

Liquidity Requirements

Opening

Closing

Debt Service Reserve Required £m 20.0 20.0 Amount of Liquidity Facility £m 20.0 20.0 Contents of Liquidity Account £m 0.0 0.0 Liquidity availability shortfall £m 0.0 0.0 Interest outstanding on any liquidity facility drawing £m 0.0 0.0 Amount of Liquidity drawn this period £m 0.0 0.0 Amount of Liquidity Facility repaid this period £m 0.0 0.0 Amount of interest paid on Liquidity Facility this period

£m

0.0

0.0

Key Providers

Moody's S&P Fitch Moody's S&P Fitch Account Bank HSBC Bank plc Aa3/P-1/Neg AA-/A-1+/Neg AA-/F1+/Stable A16951223 Agent Bank, Principal Paying Agent HSBC Bank plc Aa3/P-1/Neg AA-/A-1+/Neg AA-/F1+/Stable Liquidity Facility HSBC Bank plc Aa3/P-1/Neg AA-/A-1+/Neg AA-/F1+/Stable Irish Paying Agent HSBC Institutional Trust

HSBC Institutional Trust Services (Ireland) Limited

Not Rated

Not Rated

Not Rated

intu metrocentre finance plc presentation to fixed income ...€¦ · intu metrocentre finance plc...

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